Category Archives: Risk and risk management

Misnamed Financial Services “Reform” Bill Passes, Systemic Risk is Alive and Well

I want the word “reform” back. Between health care “reform” and financial services “reform,” Obama, his operatives, and media cheerleaders are trying to depict both initiatives as being far more salutary and far-reaching than they are. This abuse of language is yet another case of the Obama Adminsitration using branding to cover up substantive shortcomings. […]

Mirabile Dictu: $19 Billion Fee Added to Financial Reform Bill (Updated)

In a weak nod to “too big to fail” concerns, House Financial Services Committee chairman Barney Frank announced that larger banks and hedge funds would pay a fee as a way of pre-funding resolution costs. From the Financial Times: The proposed levy emerged as an unwelcome surprise for the industry deep into a late-evening congressional […]

Mike Konczal: Underwater and the Strategic Default PR Campaign: What we got when we didn’t get cramdown

By Mike Konczal, a former financial engineer and fellow with the Roosevelt Institute who writes at New Deal 2.0 A year ago a week from today I discussed the financial innovation that wasn’t. It was a look at Lewis Ranieri, the creator of the mortgage backed security, as well as one of the minds behind […]

Mirabile Dictu! The Fed Criticizes Wall Street Pay Practices

The normally bank-friendly Fed fired an unexpected shot across the industry’s bow today, taking issue with its failure to take sufficiently tough measures to curb undue risk-taking. Per the Washington Post: The Federal Reserve has completed an initial review of compensation policies at 28 large banks it oversees and has been giving them confidential feedback […]

Eurobank “Stress Test” Disclosure Likely to Increase Jitters

As we noted last week, Spain has forced the hand of other Eurozone bank regulators by declaring it will release the results of recent ECB stress tests, which earlier were to be published only on an aggregated basis, not bank by bank. There is still a good bit of confusion as to what happens next. […]

Why is No One Willing to Say Wall Street is Overpaid?

The New York Times yesterday featured an article by Yale economist Robert Shiller in which he discussed how financial reform had fallen short of addressing the conditions that caused the crisis. He focused on the failure to implement effective pay reform at the large financial firms that too big or otherwise too crucial to fail: […]

BP: House Energy and Commerce Committee Chairmen Send Damning Letter to Hayward

The House Energy and Commerce Committee chairmen, Henry Waxman and Bart Stupak published the text of a 14 page letter sent today to Tony Hayward, BP’s CEO. The House website not only contains the text of the letter, but also 23 additional documents from BP, Halliburton, Schlumberger, and Transocean. The letter itself provides a damning […]

Borrowers Who Are Bad at Math More Likely to Go Into Foreclosure

The New York Times reports on an intriguing study: Columbia University assistant business professor, Stephan Meier…. found that borrowers with poor math skills were three times more likely than others to go into foreclosure. Mr. Meier conceded that the results were not shocking, but he said he had not expected the connection between math skills […]

On BP’s Many Forms of Less Than Artful Dodging

As the Gulf oil leak continues to spew, albeit at a slightly lower rate now, and the American public is becoming resigned to the dreadful spectacle of continued damage to wildlife and coastlines, BP continues to act as a law unto itself. Not that that should be any surprise; the oil producer clearly believed from […]

Models Show Gulf Oil May Reach US East Coast This Summer

This cheery news from the SunHerald (hat tip reader Dwight Baker): The National Center for Atmospheric Research models showed Thursday that oil could enter the Gulf’s loop current, go around the tip of Florida and as far north as Cape Hatteras, N.C. According to researchers, oil could threaten East Coast beaches by early July, but […]

BP Admits to Being “Not Prepared” (“Low Odds” Fallacy Edition)

A sudden bout of semi-candor from BP suggests the top brass of the miscreant oil company recognized that it is in such deep doo-doo that the normal corporate PR playbook is no longer operative. Companies and governments often refuse to admit error or blame it on circumstances out of their control as a way to […]

It’s Official: Gulf “Top Kill” Fails

From the Washington Post, as foretold earlier by George Washington: BP Chief Operating Officer Doug Suttles said the company determined the “top kill” method had failed after studying it for three days. The method involved pumping heavy drilling mud into a crippled well 5,000 feet underwater. “We have not been able to stop the flow,” […]

Extend and Pretend Reaches A New Level

Just when you thought financial firm accounting couldn’t get more dubious…it gets worse. Deux Ex Macchiato (hat tip FT Alphaville) tells of the disconcerting changes to what was formerly called FAS Rule 157, which brought us Level 1, 2, and 3 accounting. A brief recap: Readers may recall that the Financial Standards Accounting Board implemented […]

This is What a Carry Trade Unwind Looks Like

Ouch. The media has been fixated with the euro versus the dollar, and has paid less attention to some of the dramatic action on other fronts. Mrs. Wantanabe seems to be shedding risk, big time.

Mosler: Fed’s Currency Swaps – A Backdoor Way to Lower US Interest Rates

By Warren Mosler, a fund manager, co-founder and Distinguished Research Associate of The Center for Full Employment And Price Stability at the University of Missouri in Kansas City, and creator of the modern euro swap futures contract. Gillian Tett of the Financial Times wrote today about stress in the dollar funding markets, which she regards […]